Rumbles over Storm probe

A federal parliamentary committee has warned ASIC it is losing patience with the 19-month investigation into the collapse of financial adviser Storm Financial, and wants it completed by the end of next month.

Australian Securities and Investments Commission senior officials, including chairman
Tony D’Aloisio
, will appear today before the Committee on Corporations and Financial Services – chaired by Bernie ­Ripoll – to defend the probe’s progress. The investigation is still ­under way nearly seven months after the parliamentary review and recommendations into the collapse were completed.

The regulator is also expected to defend claims the head of the inquiry, Tim Castle, a barrister, quit in March because underresourcing had hampered efforts to collect enough information to launch prosecutions.

It is the first public criticism of ASIC’s high-profile probe into the circumstances that led to the Townsville-based adviser – established and run by Emmanuel Cassimatis and his wife Julie – going out of business with losses to investors estimated by lawyers at about $3 billion.

The committee, whose roles ­include providing oversight of the regulator’s activities, concludes in a report that it has supported the regulator’s approach but “any delays ­beyond July may lead to further questions about the effectiveness".

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ASIC began its inquiry in December 2008 after heavy sharemarket losses caused by the global financial crisis devastated investors’ heavily geared portfolios. This was about three weeks before Storm directors triggered the company’s closure by appointing a voluntary administrator.

In its report, the committee said it was aware of criticism about the time it is taking to “make progress" on the Storm Financial case. “But it also ­appreciates the careful balance that needs to be maintained between on the one hand public disclosure and deterrence, and on the other achieving the best possible for people who have lost moneys."

Mr D’Aloisio, who has previously denied claims of insufficient resourcing, recently said he expected to ­deliver an update by next week. Other members of the committee expected to face questions at today’s hearing include ASIC deputy chairman ­
Belinda Gibson
and commissioners
Peter Boxall
and
Shane Tregillis
.

Mark Weir, co-chairman of the Storm Investors Consumer Action Group, a group of former investors that has been lobbying for compensation, said the time taken to complete the report had been “just diabolical".

Mr Weir said many former investors were waiting for the conclusions to assess banks’ liabilities, while others accepted compensation under the
Commonwealth Bank of Australia
’s scheme on the understanding any payment could be reviewed in the light of its findings.

“Many people are signing off the in vain hope they will get more as a result of ASIC negotiations," he said.

Bank of Queensland
’s links to Storm Financial and the recent discovery of an internal bank report ­revealing it was aware of the potential risk to borrowers and the heavy involvement of its Townsville North Ward branch are also expected to be raised. The bank’s chief executive
David Liddy
recently wrote to the committee dismissing the report, which was not made available during committee hearings at which he gave evidence, as a draft considered “inappropriate, parts of it were clearly wrong and conclusions were being drawn prematurely".

In a separate development, the committee backed ASIC’s decision to defer the issuing of a regulatory guide on “rumourtrage", which is spreading of rumours or false information to deliberately affect the price of a market product, such as shares.

Instead, the focus is expected to be on “lifting standards in the management of information".